GlobalFoundries, designers and manufacturers of nanotechnology for everything from faster, more powerful smartwatches and smartphones to missiles and satellites, jumped from fourth to second in terms of revenue following the takeover of IBM's microchip manufacturing facilities in East Fishkill and Burlington, Vermont, last year, according to Gartner, a high-tech research firm.
GlobalFoundries had nearly $4.7 billion in revenue in 2015, up from $4.4 billion in 2014. GlobalFoundries now has control of 9.6 percent of the market. The world’s largest chip manufacturer, Taiwan Semiconductor Manufacturing Co., had $26.5 billion in revenue last year.
One year after the acquisition, GlobalFoundries executives say they are leveraging the might and prestige of former IBM researchers and developers from East Fishkill to create what they call an “innovation hub” there. The company is looking to shed unused or underused buildings at the southern Dutchess campus as it faces uncertain economies in Europe and Asia and a tepid semiconductor sales market.
An innovation hub
The fabrication facility at East Fishkill is also part of a burgeoning Northeast Technology Corridor, which includes GlobalFoundries’ Fab 8 facility in Saratoga County and research and development locations at SUNY Polytechnic Institute’s College of Nanoscale Science and Engineering in Albany.As part of the deal, GlobalFoundries acquired the East Fishkill chip fabrication facility and absorbed 5,000 employees, bringing the number of employees up to roughly 18,000. Those former IBMers now work in East Fishkill or Burlington, Vermont.
By leveraging the experience and research of the former Big Blue staff, GlobalFoundries was able to secure a major government contract in June to supply microchips for U.S. spy satellites, missiles and combat jets.
In the future, GlobalFoundries plans to improve on its current technology to create applications for drones, robotics and even self-driving cars, executives say.
“What we are trying to do in East Fishkill now is we are trying to use Fishkill as an innovation hub,” said Anthony Yu, head of East Fishkill’s innovation and technology division. “We have tremendous technologists and people here know they are part of a leading semiconductor innovation here. Employees are excited. They are really driving these new product releases.”
One of the latest developments in innovation at East Fishkill, and one that also leverages 10 years of research at IBM, is the rollout of silicon photonics. Silicon photonics is technology that enables a device such as a smartphone to send enormous amounts of data over great distances using light, allowing for faster bandwidth speeds.
With the explosion of real-time video, texting of photos, and downloading movies onto your phone, photonics allows you to pass huge amount of data at faster speeds and without errors, according to Yu.
“It’s the perfect storm,” Yu said. “He were are in Fishkill, a high volume manufacturing site, leveraging the research that IBM was developing with us as we became GlobalFoundries. We are seeing the demand for bandwidth double every three years. There’s an incredible appetite for bandwidth and we are rolling out products next year to meet those demands.”
Basically, it means computing at the speed of light. And, who wouldn’t want a faster smartphone?
But, as technology becomes more advanced and expensive to develop, executives say they will have to be mindful of cost-competitiveness with other chip manufacturers.
“We’re in an industry that is very competitive,” Cadigan said. “In every location, there is a drumbeat around cost competitiveness. You’re not going to avoid it — no matter where you go.”
New company, new culture
As a result of the transition, the culture at the East Fishkill site also has shifted, according to executives.Cadigan said that former IBM developers, who once had to focus on a myriad of things, including keeping an eye on the financial markets, are now solely focusing on what they do best: designing semiconductors.
“Employees appreciate that,” he said. “They know when they come in to work each Monday that they are going to be working on semiconductors — that’s it. It’s good for morale and it’s good for our focus.”
Nate Buel, of Hyde Park, works on the production side of GlobalFoundries at East Fishkill as a senior wafer fab line lead. Before the acquisition, Buel worked with IBM for 16 years. One year later at GlobalFoundries, Buel said he has noticed “a lot more positive energy” around the fab.
“We were always compared to other groups and always held accountable for different sectors,” Buel said about his time at IBM. “We were always wondering how we can make more chips. Now, we don’t have to worry about other sectors and whether (it will effect) our raises. We know what our goal is.”
Buel said he felt a change in the culture most recently when he was able to bring his family to the fab as part of Family Day. Employees' families took tours of the facility, ate ice cream and even got to douse executives in a dunking booth. Family Day was once a popular tradition at the fab site under IBM but had been abandoned in recent years.
“It was something we always heard about it,” he said about Family Day. “It was great to let (my family) see what we actually do all day.”
“I think we hit the mark this year,” he said. “We’re less concerned about the transition. There is a lot more positive energy, and I feel pretty confident going forward (with GlobalFoundries).”
Going forward, there are some challenges ahead for GlobalFoundries. Mainly, balancing costs of manufacturing of its technology within an unpredictable and competitive marketplace. In East Fishkill, executives are faced with selling more than 50 percent of the property or 300 acres, much of which has been vacant for several years.
But, with the successful transition, GlobalFoundries executives in East Fishkill say they are optimistic about the future.
“It could not have gone better. There’s a track record in the technology industry that these types of mergers do not play out very well,” Cadigan said. “…We beat the odds — bar none.”
Cadigan is the former head of IBM Microelectronics. Now he leads worldwide sales for the company, and, although his office is in East Fishkill, he often spends his time traveling the world to meet with each of the company’s 250 multinational corporate customers.
“The motivation, the excitement, and the response in the marketplace has been very, very positive for us and our people,” he said.
Time of change
A year ago, IBM, which was among the first companies to develop the transistors that eventually became microchips, suddenly found itself falling behind companies whose sole business was microchip manufacturing. The company was quickly losing money. As the chip market became more competitive, it was untenable for IBM to continue to produce the chips and expect to remain a major player in the market.But, IBM still needed chips for its own hardware products and a buyer for its East Fishkill site. GlobalFoundries, which was launched in 2009, had been slowly buying up smaller manufacturers, but was competing with chip makers who had a well-established client base. Seeing the needs of each company, IBM and GlobalFoundries struck a deal.
GlobalFoundries still supports IBM’s mainframe products as part of a 10-year deal to supply high-end chips. The chips are manufactured in East Fishkill, sent to GlobalFoundries location in Burlington to be packaged and then shipped to IBM in Poughkeepsie.
"IBM’s strategy is one of innovation, transformation and a constant evolution," said Jamie Thomas, general manager of Strategy and Development at IBM Systems. "As IBM continues to perform the fundamental research, as well as semiconductor circuit and system design, GlobalFoundries has proven to be a trusted manufacturing partner and supplier. Systems of the future will continue to be differentiated at the systems and chip design level, which is where IBM is focused."
Future challenges
Unpredictable stock markets, such as in China, and Britain’s vote to exit from the European Union create unknowns for the company.“Brexit was a surprise,” Cadigan said. “We continue to see ramifications of that. My call is that it will level out, but it will take a little time. Right now, we haven’t seen any fatal signs, but it is still pretty early since the post-Friday outcome. We have a senior meeting coming up. Part of the discussion is going to be, ‘What headlights can we draw from this thing? What could it mean to us?’”
Semiconductor sales across the market were off to a sluggish start in 2016, according to the Semiconductor Industry Association. Industry forecast projects sales will decrease 2.4 percent in 2016, but increase 2.0 percent in 2017, according to the association.
“The pundits who predict the industry outcome for 2016, there is some scatter around those numbers, some people would say the industry will be flat this year,” Cadigan said. “That’s after a relatively flat or slightly minus last year. A lot of it depends on what market segments you service. Fortunately, for us, we serve two of the market segments. One that is doing quite good — the enterprise segment, the networking also known as cellphone data traffic infrastructure. The other segment is smartphone.”
One way to ensure their success, executives say, is to continue to expand. Although the company is based in Silicon Valley, it has manufacturing operations in Malta, New York, Dresden, Germany, and Singapore, in addition to the East Fishkill and Essex Junction sites.
Most recently, GlobalFoundries announced it has a memorandum of understanding to establish a joint venture in China to manufacture silicon there. Cadigan said that the company hopes to reach a definitive agreement in August.
“It’s competitive market, but if you are going to be a major player in China you have to have a facility in China. There are indications that the Chinese government is putting additional pressure on companies if they are consuming silicon that the silicon has to be made onshore,” Cadigan said. “Maybe that is not today, maybe it’s not tomorrow, but it could eventually occur. So we moved ahead.”
Changes also are in the works for the East Fishkill site.
But more than 50 percent of property at GlobalFoundries has been dormant in the past year. Approximately 300 acres will be up for sale. That includes parking lots, woods and 10 buildings with a range of square footage.
Some of the larger buildings were built specifically for industrial manufacturing, while some of the smaller buildings were constructed for mixed use. It would be up to the new property owners to decide whether to redevelop the buildings or tear them down and start from scratch.
Cadigan said the company is still discussing strategies to divide and sell the property with the town.
“The town has been very supportive. The underutilized space and buildings don’t do a lot for commerce,” Cadigan said. “So, if we can do something on the development side, we see it as a positive for the community.”
http://www.poughkeepsiejournal.com/story/news/2016/07/02/1-year-later-globalfoundries-east-fishkill-innovation-hub/86467900/
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